<PAGE>
 
                                 EXHIBIT 10-B
                                 ------------
                                        
        Conectiv Deferred Compensation Plan, effective January 1, 1999
<PAGE>
 
                                   CONECTIV

                          DEFERRED COMPENSATION PLAN

             (As Amended and Restated, Effective January 1, 1999)
<PAGE>
 
                                   CONECTIV
                          DEFERRED COMPENSATION PLAN
 
                               TABLE OF CONTENTS
                               -----------------

                                                                    Page
                                                                    ----
                                                                    
ARTICLE 1 - PURPOSE................................................    1
                                                                    
 1.1.  Name........................................................    1
 1.2.  Effective Date..............................................    1
 1.3.  Purpose.....................................................    1
                                                                    
ARTICLE 2 - DEFINITIONS............................................    1
                                                                    
ARTICLE 3 - PARTICIPATION BY ELIGIBLE INDIVIDUALS..................   12
                                                                    
 3.1.  Participation...............................................   12
 3.2.  Failure to Designate........................................   12
 3.3.  Continuity of Participation.................................   12
 3.4.  Immediate Cash-Out of Ineligible Individuals................   12
                                                                    
ARTICLE 4 - COMPENSATION DEFERRAL..................................   12
                                                                    
 4.1.  Deferral Elections..........................................   12
 4.2.  Period for Which Election is Effective......................   14
                                                                    
ARTICLE 5 - EMPLOYER MATCHING CREDITS..............................   14
                                                                    
 5.1.  Employer Matching Credit....................................   14
 5.2.  Employer Matching Credit for Limited Participant............   15
                                                                    
ARTICLE 6 - DISTRIBUTIONS..........................................   15
                                                                    
 6.1.  Election of Distribution Date...............................   15
 6.2.  Election of Form of Payment.................................   15
 6.3.  Unforeseeable Emergency.....................................   16
 6.4.  Special Election for Early Distribution.....................   16
 6.5.  Distributions on Death......................................   17
 6.6.  Acceleration of Payments....................................   17
 6.7.  Valuation of Distributions..................................   17
                                                                    
ARTICLE 7 - FORFEITURE FOR CAUSE...................................   17
                                                                    
 7.1.  Forfeiture for Cause........................................   17
                                                                    
<PAGE>
 
ARTICLE 8 - ACCOUNTS...............................................   18
                                                                    
 8.1.  General.....................................................   18
 8.2.  Deferred Compensation Account...............................   18
 8.3.  Deferred Stock Account......................................   18
 8.4.  Employer Matching Account...................................   19
 8.5.  Crediting of Earnings and Losses, and Statement of Account..   19
 8.6.  Investment to Facilitate Payment of Benefits................   19
                                                                    
ARTICLE 9 - FUNDING................................................   20
                                                                    
 9.1.  Plan Unfunded...............................................   20
                                                                    
ARTICLE 10 - ADMINISTRATION AND INTERPRETATION.....................   20
                                                                    
 10.1.  Administration.............................................   20
 10.2.  Interpretation.............................................   20
 10.3.  Records and Reports........................................   21
 10.4.  Payment of Expenses........................................   21
 10.5.  Indemnification for Liability..............................   21
 10.6.  Claims Procedure...........................................   21
 10.7.  Review Procedure...........................................   22
                                                                    
ARTICLE 11 - AMENDMENT AND TERMINATION.............................   22
                                                                    
 11.1.  Amendment and Termination..................................   22
 11.2.  Deemed Amendment to Matching Formula.......................   22
                                                                    
ARTICLE 12 - MISCELLANEOUS PROVISIONS..............................   22
                                                                    
 12.1.  Right of Employers to Take Employment Actions..............   22
 12.2.  Alienation or Assignment of Benefits.......................   23
 12.3.  Right to Withhold..........................................   23
 12.4.  Construction...............................................   23
 12.5.  Headings...................................................   23
 12.6.  Number and Gender..........................................   23
 12.7.  Change in Control..........................................   23
 
<PAGE>
 
                                   CONECTIV
                          DEFERRED COMPENSATION PLAN

             (As Amended and Restated, Effective January 1, 1999)


                                   ARTICLE 1

                                    PURPOSE
                                    -------
        1.1. Name. The name of this plan is the Conectiv Deferred Compensation
             ----   
Plan.            

        1.2. Effective Date. The effective date of the Plan is July 1, 1998;
             --------------   
provided, however, that with respect to implementing various portions of the
Plan the Board or the Committee may specify a later effective date for one or
more components of the Plan. The Plan is amended and restated, effective January
1, 1999, to include rules governing the DSPP and the MSPP.

        1.3. Purpose. The Plan is established effective July 1, 1998 by Conectiv
             -------           
for the purpose of providing deferred compensation benefits for non-employee
directors of Conectiv and providing supplemental retirement and deferred
compensation benefits for a select group of management and/or highly compensated
employees of the Employer. The Plan provides a means whereby Eligible
Individuals may defer:

              1.3.1. A portion or all of their compensation in the form of
salary, bonus and/or Cash Awards they would otherwise receive for services
performed for the Employer;

              1.3.2. Receipt of a portion or all of Stock Awards; and

              1.3.3. Receipt of Shares and corresponding recognition of
compensation income upon the exercise of Options.

                                   ARTICLE 2
                                  DEFINITIONS
                                  -----------

        Whenever the following initially capitalized words and phrases are used
in the Plan, they shall have the meanings specified below unless the context
clearly indicates to the contrary:

        1.4. "Account"means the Deferred Compensation Account, the Deferred
              -------  
Stock Account, the Employer Matching Account, the MSPP Account, the MSPP
Matching Account, the DSPP Account and the DSPP Matching Account of a
Participant.



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        1.5. "Administrator" means the person or committee designated as the
              -------------  
administrator of the Plan by the Board, or such entity's duly-appointed
delegate.

        1.6. "Beneficiary" means such person or legal entity as may be
              -----------  
designated by a Participant to receive benefits hereunder after such
Participant's death.

        1.7. "Board" means the Board of Directors of Conectiv.
              -----             

        1.8. "Cash Award(s)" means Annual Incentives, Performance Units, Stock
              -------------  
Appreciation Rights, and Dividend Equivalents awarded pursuant to the CICP (as
such terms are defined in that plan) that are payable in cash, as well as any
other awards pursuant to any other Incentive Plan that are payable in cash, as
determined by the Committee.

        1.9. "Change in Control" shall mean the first to occur, after the
              -----------------  
effective date, of any of the following:

              1.9.1. If any Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act), directly or
indirectly, of securities of Conectiv (not including in the securities
beneficially owned by such Person any securities acquired directly from Conectiv
or its subsidiaries) representing 25% or more of either the then-outstanding
shares of common stock of Conectiv or the combined voting power of Conectiv's
then outstanding securities; or

              1.9.2. If during any period of 24 consecutive months during the
existence of the Plan commencing on or after the effective date, the individuals
who, at the beginning of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to constitute at least a
majority thereof; provided that a director who was not a director at the
beginning of such 24-month period shall be deemed to have satisfied such 24-
month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of or with the approval of, at least two-third of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or by prior
operation of this Section 2.6.2; or

                1.9.3. The consummation of a merger or consolidation of Conectiv
with any other corporation other than (i) a merger or consolidation which would
result in the voting securities of Conectiv outstanding immediately prior to
such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or any parent thereof) at least 60% of the combined voting power of the voting
securities of Conectiv or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of Conectiv (or similar
transaction) in which no Person is or becomes the beneficial owner, as defined
in Section 2.6.1, directly or indirectly, of securities of Conectiv (not
including in the securities beneficially owned by such Person any securities
acquired directly from Conectiv or its subsidiaries) representing 40% or more of
either the then-outstanding shares of 


                                      -2-
<PAGE>
 
common stock of Conectiv or the combined voting power of Conectiv's then-
outstanding securities; or

              1.9.4. The stockholders of Conectiv approve a plan of complete
liquidation or dissolution of Conectiv, or there is consummated an agreement for
the sale or disposition by Conectiv of all or substantially all of Conectiv's
assets, other than a sale or disposition by Conectiv of all or substantially all
of Conectiv's assets to an entity, at least 60% of the combined voting power of
the voting securities of which are owned by Persons in substantially the same
proportion as their ownership of Conectiv immediately prior to such sale.

Upon the occurrence of a Change in Control as provided above, no subsequent
event or condition shall constitute a Change in Control for purposes of the
Plan, with the result that there can be no more than one Change in Control
hereunder.

For purposes of this Section, the term "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include: (i) Conectiv or any of
its subsidiaries; (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of Conectiv or any of its subsidiaries; (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities; (iv) a corporation owned directly or indirectly by the stockholders
of Conectiv in substantially the same proportions as their ownership of stock of
Conectiv; or (v) with respect to any particular Participant, such Participant or
any "group" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act) which includes such Participant).

        1.10. "CICP" means the Conectiv, Inc. Incentive Compensation Plan.
               ----                                                       

        1.11. "Code" means the Internal Revenue Code of 1986, as amended.
               ----                                                      

        1.12. "Committee" means the Compensation Committee of the Board.
               ---------                                                

        1.13. "Compensation" means, as applicable:
               ------------                       

              1.13.1. The base salary of a Participant for a Plan Year (before
any reduction to such salary is effected in accordance with the Election, or in
accordance with any salary reduction agreement effected under the terms of
Sections 125 or 401(k) of the Code);

              1.13.2. The amount of bonus, if any, earned by an Eligible
Individual during the Plan Year;

              1.13.3. Annual retainer, meeting fees, and any other cash payments
received by an Eligible Individual in his or her capacity as a non-employee
director;

              1.13.4. Severance payments;

              1.13.5. Cash Awards;

                                      -3-
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              1.13.6. Stock Awards;

              1.13.7. Dividend equivalents credited with respect to Deferred
Stock and Deferred Option Stock; and

              1.13.8. Dividend equivalents credited with respect to Stock
Awards.

        1.14. "Conectiv" means Conectiv.
               --------         

        1.15. "Date of Grant" means the date as of which an Option is granted.
               -------------  
        
        1.16. "Deferred Compensation Account" means the bookkeeping account
               -----------------------------         
established by the Administrator for each Participant to which the Participant's
cash Compensation deferred pursuant to Section 4.1 (and income thereon) is
credited and from which distributions to the Participant or to his or her
Beneficiary are debited. A Participant shall at all times be fully vested in the
balance of his or her Deferred Compensation Account which is attributable to
cash Compensation except to the extent that a Cash Award has not yet vested. The
Deferred Compensation Account, if applicable, shall also consist of a Transfer
Deferred Compensation Subaccount.

        1.17. "Deferred Option Stock" means the number of hypothetical Shares
               --------------------- 
determined as the excess of (a) the number of Option Shares over (b) the number
of Other Available Shares having a Fair Market Value as of the date of exercise
of an Option equal to the exercise price for such Option Shares as to which an
Eligible Individual provides to Conectiv evidence of ownership of sufficient
Shares to pay the exercise price for such Option Shares.

        1.18. "Deferred Stock" means the number of hypothetical Shares
               -------------- 
conditionally granted to a Participant pursuant to a Stock Award and deferred
pursuant to Section 4.1.

        1.19. "Deferred Stock Account" means the bookkeeping account established
               ---------------------- 
by the Administrator for each Participant to which the Participant's Deferred
Stock and Deferred Option Stock is credited and from which distributions to the
Participant or to his or her Beneficiary are debited. A Participant shall at all
times be fully vested in the balance of his or her Deferred Stock Account,
except to the extent Shares with respect to a Stock Award have not yet vested.
The Deferred Stock Account, if applicable, shall also consist of a Transfer
Deferred Stock Subaccount.

        1.20. "DSPP" means the Director Stock Purchase Program. The DSPP is
               ---- 
designed to allow and encourage Eligible Individuals who are non-employee
directors to purchase RSUs at a discount and to provide such individuals the
opportunity to manage their personal tax liability. All Eligible Individuals who
are non-employee directors of Conectiv are eligible to participate in the DSPP.
Under the DSPP, as further provided in this Plan:


                                      -4-
<PAGE>
 
              1.20.1. All RSUs are "acquired" at a 20% discount. Thus, RSUs
having a value (based on the closing price of Shares as of the date Compensation
subject to a DSPP Election would, but for such DSPP Election, be paid (the
"Initial Credit Date")) are credited to the DSPP Account of each DSPP
Participant. As of each Initial Credit Date, a number of RSUs equal to 25% of
the number of RSUs credited to the DSPP Account shall be credited to the DSPP
Matching Account.

              1.20.2. RSU Dividends shall be deemed invested and reinvested in
RSUs based on the closing price of Shares as of the applicable dividend payment
date, and shall be credited to the DSPP Participant's DSPP Account or DSPP
Matching Account, as applicable.

              1.20.3. Except as otherwise provided in this Section 2.17.3, as
soon as practicable following the completion of the second calendar year
beginning after the year to which a DSPP Election applies, Conectiv shall pay
the DSPP Participant (or his or her Beneficiary) a number of Shares equal to the
number of RSUs credited to the DSPP Participant's DSPP Account and DSPP Matching
Account attributable to the DSPP Election for such year. Any amount credited to
a DSPP Participant's DSPP Account or DSPP Matching Account which is not
distributable pursuant to this Section 2.17.3 shall be forfeited.

                      (1) If a DSPP Participant voluntarily resigns his or her
position as a non-employee director and does not continue in service to Conectiv
as an officer or employee, then, as soon as practicable following such
resignation, Conectiv shall pay such DSPP Participant (or his or her
Beneficiary) cash having a value equal to the lesser of (i) the sum of the
individual amounts credited to the DSPP Participant's DSPP Account as of each
Initial Credit Date, which has not been distributed nor deferred pursuant to the
general deferral provisions of the Plan or (ii) the fair market value of RSUs
credited to the DSPP Participant's DSPP Account and DSPP Matching Account as of
the effective date of the DSPP Participant's voluntary resignation.

                      (2) If a DSPP Participant is removed as a non-employee
director other than for cause (as determined by the Board in its sole
discretion), then, as soon as practicable following the effective date of such
removal, Conectiv shall pay such DSPP Participant (or his or her Beneficiary)
cash having a value equal to the sum of (i) the product of (x) the value of the
DSPP Participant's DSPP Account and DSPP Matching Account attributable to each
deferral year times (y) a fraction, the numerator of which is the number of days
from the beginning of such deferral year to the effective date of such removal,
and the denominator of which is 1095; plus (ii) the product of (x) the sum of
the individual amounts credited to the DSPP Participant's DSPP Account as of
each Initial Credit Date, which has not been distributed nor deferred pursuant
to the general deferral provisions of the Plan times (y) one minus the fraction
as determined under part (i)(y) of this paragraph (b).

                      (3) If a DSPP Participant is removed as a non-employee
director for cause (as determined by the Board in its sole discretion), then, as
soon as practicable following the effective date of such removal, Conectiv shall
pay such DSPP Participant (or his or her Beneficiary) cash having a value equal
to the sum of the individual amounts credited to the 


                                      -5-
<PAGE>
 
DSPP Participant's DSPP Account as of each Initial Credit Date, which has not
been distributed nor deferred pursuant to the general deferral provisions of the
Plan.

                      (4) If a DSPP Participant's service as a non-employee
director terminates because of the termination of the DSPP Participant's term as
a director and he has not been re-elected and does not continue in service to
Conectiv as an officer or employee, death, disability (as determined by the
Board in its sole discretion), or if there is a Change in Control, then, within
60 days following such termination or Change in Control, as applicable, Conectiv
(or its successor-in-interest) shall pay such DSPP Participant (or his or her
Beneficiary) cash having a value equal to the value of the RSUs credited to such
DSPP Participant's DSPP Account and DSPP Matching Account.

                      (5) Pursuant to the general deferral election provisions
of the Plan, a DSPP Participant may elect to defer the receipt of amounts
credited to his or her DSPP Account and his or her DSPP Matching Account for
periods following the end of the second calendar year beginning after the year
to which a DSPP Election applies. Upon the effective date of such general
deferral election, the applicable amounts credited to the Participant's DSPP
Account and DSPP Matching Account shall be credited to a sub-account of the
Participant's Deferral Account under the Plan, and shall continue to be credited
in the form of RSUs and subject to distribution in the form of Shares, in
accordance with, and except as otherwise provided by, the Plan.

        1.21. "DSPP Account" means the bookkeeping account established by the
               ------------ 
Administrator for each Eligible Individual who is a non-employee director to
which annual retainer, meeting fees or any other cash payments of Compensation
payable to such Eligible Individual in such capacity, are credited in the form
of RSUs pursuant to the Director Stock Purchase Program (and income thereon) is
credited and from which distributions to the Participant or to his or her
Beneficiary are debited.

        1.22. "DSPP Election" means an election on a form provided by the
               ------------- 
Administrator by an Eligible Individual who is a non-employee director to
participate in the DSPP. The timing of DSPP Elections shall be governed by
Section 4.1.

        1.23. "DSPP Matching Account" means the bookkeeping account established
               --------------------- 
by the Administrator for a Participant to which the Participant's DSPP Matching
Contributions (and income thereon) are credited and from which distributions to
the Participant or his or her Beneficiary are debited.

        1.24. "DSPP Participant" means an Eligible Individual who has elected to
               ---------------- 
participate in the DSPP, as described in Section 2.17.

        1.25. "Election" means a written election on a form made available from
               -------- 
time to time by the Administrator, whereby an Eligible Individual enrolls as a
Participant and elects to defer Compensation pursuant to Article 4 of the Plan.


                                      -6-
<PAGE>
 
        1.26. "Eligible Individual" means (a) an individual employed by the
               ------------------- 
Employer who is a member of a select group of management and/or highly
compensated employees and is determined by the Committee to be eligible to
participate hereunder pursuant to Article 3; (b) non-employee directors of
Conectiv; and (c) if determined by the Committee to be eligible to participate
pursuant to Article 3, non-employee directors of any subsidiary or affiliate of
Conectiv.

        1.27. "Employer" means each subsidiary or affiliate of Conectiv that
               -------- 
employs or retains one or more Eligible Individuals who have become Participants
in accordance with Article 3 of the Plan.

        1.28. "Employer Matching Account" means the bookkeeping account
               ------------------------- 
established by the Administrator for a Participant to which the Participant's
Employer Matching Credit (and income thereon) is credited and from which
distributions to the Participant or his or her Beneficiary are debited. A
Participant shall be fully vested in the balance of his or her Employer Matching
Account, except as provided in Section 7.1.

        1.29. "Employer Matching Credit" means an amount credited (if any) to
               ------------------------ 
the Participant's Employer Matching Account pursuant to Section 5.1 of the Plan.


        1.30. "Fair Market Value."
               ----------------- 
                
              1.30.1. If Shares are listed on a stock exchange, Fair Market
Value shall be determined based on the closing market price of such stock as
reported in the New York Stock Exchange Composite Transactions, or, if Shares
are not traded on the New York Stock Exchange on the relevant valuation date,
the last closing market price reported prior to such date.

              1.30.2. If Shares are not so listed, but trades of Shares are
reported on the Nasdaq National Market, the last quoted sale price of a Share on
the Nasdaq National Market on the last trading day prior to the date of
determination.

              1.30.3. If Shares are not so listed nor trades of Shares so
reported, Fair Market Value shall be determined by the Committee in good faith.

        1.31. "Incentive Plans" means the CICP, as well as, at the discretion of
               --------------- 
the Committee, any other incentive or executive compensation plan of Conectiv or
any Employer, whether currently in effect or adopted after the effective date of
the Plan.

        1.32. "Investment Alternatives" means the investment options made
               -----------------------         
available to employees under the Savings Plan, which shall be used as measuring
standards for credits to a Participant's Deferred Compensation Account. In the
case of the Participant's Employer Matching Account and Deferred Stock Account,
the only Investment Alternative shall be Shares as traded on the open market.



                                      -7-
<PAGE>
 
        1.33. "MSPP" means the Management Stock Purchase Program. The MSPP is
               ---- 
designed to allow and encourage Eligible Individuals to purchase RSUs at a
discount and to provide such individuals the opportunity to manage their
personal tax liability. All Eligible Individuals who are designated as
participants in the annual incentive portion of the CICP are eligible to
participate in the MSPP. Under the MSPP, as further provided in this Plan:

              1.33.1. All RSUs are "acquired" at a 20% discount. Thus, RSUs
having a value (based on the closing price of Shares as of the date Compensation
subject to the Mandatory MSPP Allocation (as described in Section 2.30.2) or to
an MSPP Election would, but for such Mandatory MSPP Allocation or MSPP Election,
be paid (the "Initial Credit Date")) are credited to the MSPP Account of each
MSPP Participant. As of each Initial Credit Date, a number of RSUs equal to 25%
of the number of RSUs credited to the MSPP Account shall be credited to the MSPP
Matching Account.

              1.33.2. Twenty percent (20%) of an MSPP Participant's annual
incentive bonus declared under the CICP and payable after 1998 shall be
allocated as a Mandatory MSPP Allocation to the Participant's MSPP Account,
credited in the form of RSUs.

              1.33.3. RSU Dividends shall be deemed invested and reinvested in
RSUs based on the closing price of Shares as of the applicable dividend payment
date, and shall be credited to the MSPP Participant's MSPP Account or MSPP
Matching Account, as applicable.

              1.33.4. Except as otherwise provided in this Section 2.30.4, as
soon as practicable following the completion of the second calendar year
beginning after the year to which an MSPP Election applies, Conectiv shall pay
the MSPP Participant (or his or her Beneficiary) a number of Shares equal to the
number of RSUs credited to the MSPP Participant's MSPP Account and MSPP Matching
Account attributable to the MSPP Election for such year. Any amount credited to
an MSPP Participant's MSPP Account or MSPP Matching Account which is not
distributable pursuant to this Section 2.30.4 shall be forfeited.

                      (1) If an MSPP Participant voluntarily resigns his or her
employment (other than by retirement after having reached an age where benefits
under any tax-qualified pension plan maintained by Conectiv are immediately
distributable) and does not continue in service to Conectiv as an officer or
director, then, as soon as practicable following such resignation, Conectiv
shall pay such MSPP Participant (or his or her Beneficiary) cash having a value
equal to the lesser of (i) the sum of the individual amounts credited to the
MSPP Participant's MSPP Account as of each Initial Credit Date, which has not
been distributed nor deferred pursuant to the general deferral provisions of the
Plan or (ii) the fair market value of RSUs credited to the MSPP Participant's
MSPP Account and MSPP Matching Account as of the effective date of the MSPP
Participant's voluntary resignation.

                      (2) If an MSPP Participant's employment is terminated by
Conectiv other than for cause (as determined by the Administrator in its sole
discretion), then, as soon as practicable following the effective date of such
removal, Conectiv shall pay such MSPP Participant (or his or her Beneficiary)
cash having a value equal to the sum of (i) the product of 



                                      -8-
<PAGE>
 
(x) the value of the MSPP Participant's MSPP Account and MSPP Matching Account
attributable to each deferral year times (y) a fraction, the numerator of which
is the number of days from the beginning of such deferral year to the effective
date of such removal, and the denominator of which is 1095; plus (ii) the
product of (x) the sum of the individual amounts credited to the MSPP
Participant's MSPP Account as of each Initial Credit Date, which has not been
distributed nor deferred pursuant to the general deferral provisions of the Plan
times (y) one minus the fraction as determined under part (i)(y) of this
paragraph (b).

                      (3) If an MSPP Participant's employment is terminated by
Conectiv for cause (as determined by the Administrator in its sole discretion),
then, as soon as practicable following the effective date of such termination,
Conectiv shall pay such MSPP Participant (or his or her Beneficiary) cash having
a value equal to the sum of the individual amounts voluntarily credited to the
MSPP Participant's MSPP Account as of each Initial Credit Date, which has not
been distributed nor deferred pursuant to the general deferral provisions of the
Plan.

                      (4) If an MSPP Participant retires after having reached an
age where benefits under any pension plan maintained by Conectiv are immediately
distributable and he does not continue in service to Conectiv as a director or
officer, dies in service, becomes disabled (as determined by the Administrator
in its sole discretion), or if there is a Change in Control, then, within 60
days following such retirement or Change in Control, as applicable, Conectiv (or
its successor-in-interest) shall pay such MSPP Participant (or his or her
Beneficiary) cash having a value equal to the value of the RSUs credited to such
MSPP Participant's MSPP Account and MSPP Matching Account.

                      (5) Pursuant to the general deferral election provisions
of the Plan, an MSPP Participant may elect to defer the receipt of amounts
credited to his or her MSPP Account and his or her MSPP Matching Account for
periods following the end of the second calendar year beginning after the year
to which a Mandatory MSPP Allocation applies. Upon the effective date of such
general deferral election, the applicable amounts credited to the Participant's
MSPP Account and MSPP Matching Account shall be credited to a sub-account of the
Participant's Deferral Account under the Plan, and shall continue to be credited
in the form of RSUs and subject to distribution in the form of Shares, in
accordance with, and except as otherwise provided by, the Plan.

        1.34. "MSPP Account" means the bookkeeping account established by the
               ------------ 
Administrator for each Eligible Individual who is designated as a participant in
the annual incentive portion of the CICP to which the amount of Compensation
subject to the Mandatory MSPP Allocation and an MSPP Election are credited in
the form of RSUs pursuant to the Management Stock Purchase Program (and income
thereon) is credited and from which distributions to the Participant or to his
or her Beneficiary are debited.

        1.35. "MSPP Election" means an election on a form provided by the
               -------------         
Administrator by an Eligible Individual who is an MSPP Participant to defer the
receipt of any whole percentage of annual incentive bonus declared under the
CICP and payable after 1998, 



                                      -9-
<PAGE>
 
provided that an MSPP Participant may not elect to defer the receipt of more
than 30% of such annual incentive bonus. The timing of DSPP Elections shall be
governed by Section 4.1.

        1.36. "MSPP Matching Account" means the bookkeeping account established
               --------------------- 
by the Administrator for a Participant to which the Participant's MSPP Matching
Contributions (and income thereon) are credited and from which distributions to
the Participant or his or her Beneficiary are debited.

        1.37. "MSPP Participant" means an Eligible Individual who is designated
               ---------------- 
as a participant in the annual incentive portion of the CICP.

        1.38. "Option" means a non-qualified stock option to purchase Shares
               ------ 
granted pursuant to an Incentive Plan; provided that each Option with a
different Date of Grant shall be considered a separate Option.

        1.39. "Option Shares" mean the Shares that are subject to the portion of
               ------------- 
an Option as to which an Election is in effect.

        1.40. "Other Available Shares" means, as of any date, the excess, if any
               ---------------------- 
of:

              1.40.1. The total number of Shares owned by a Participant; over

              1.40.2. The sum of:

                      (1) The number of Shares owned by such Participant for
less than six months; plus

                      (2) The number of Shares owned by such Participant that
has, within the preceding six months, been received in exchange for Shares
surrendered as payment, in full or in part, of the exercise price for an option
to purchase any securities of an Employer under any Incentive Plan, but only to
the extent of the number of Shares surrendered.

For purposes of this Section, a Share that is subject to a deferral election
pursuant to this Plan or an Incentive Plan shall not be treated as owned by such
Participant until all conditions to the delivery of such Share have lapsed.

        1.41. "Participant" means an Eligible Individual designated as a
               -----------        
Participant by the Committee and who has amounts standing to his or her credit
under an Account. The Committee may designate an Eligible Individual as a
Participant for purposes of part, but not all, of the Plan.

        1.42. "Plan" means the Conectiv Deferred Compensation Plan.
               ---- 

        1.43. "Plan Year" means the calendar year.
               --------- 



                                     -10-
<PAGE>
 
        1.44. "Prior Plan(s)" means any executive compensation, stock option,
               ------------- 
bonus or incentive compensation plan maintained by Delmarva Power & Light
Company or Atlantic City Electric Company or any affiliated company.

        1.45. "RSU" means a hypothetical Share in which amounts credited to the
               --- 
DSPP Account, DSPP Matching Account, MSPP Account and MSPP Matching Account are
deemed invested, subject to Section 2.17 and Section 2.30.

        1.46. "RSU Dividends" means a hypothetical dividend payable with respect
               ------------- 
to an RSU. An RSU Dividend shall be deemed paid at the same times and in the
same amounts as dividends are paid with respect to Shares.

        1.47. "Savings Plan" means the Conectiv Savings and Investment Plan.
               ------------          

        1.48. "Share" or "Shares" means a share of common stock of Conectiv,
               -----      ------       
and, if applicable, a share of Class A common stock of Conectiv, or such other
securities issued by Conectiv as may be subject to adjustment in the event that
Shares are changed into or exchanged for a different number or kind of shares of
stock or other securities of Conectiv, whether through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split-up or other
substitution of securities of Conectiv. In such event, the Committee shall make
appropriate equitable anti-dilution adjustments to the number and class of
Deferred Stock and Deferred Option Stock credited to Participants' Deferred
Stock Accounts. The Committee's adjustment shall be effective and binding for
all purposes of the Plan .

        1.49. "Stock Award(s)" means (a) Annual Incentives, Performance Units,
               -------------- 
Stock Appreciation Rights and Dividend Equivalents awarded pursuant to the CICP
(as such terms are defined in that plan) that are payable in Shares; (b) any
other awards that are payable in Shares pursuant to any other Incentive Plan, as
determined by the Committee; (c) with respect to an Option, the number of
Shares, that upon exercise of all or part of an Option, could be credited to a
Participant's Account as Deferred Option Stock; and (d) with respect to non-
employee directors, any payments made in the form of Shares.

        1.50. "Transfer Deferred Compensation Subaccount" means the bookkeeping
               -----------------------------------------         
account established by the Administrator for each Participant to which the
Participant's cash compensation deferred pursuant to a Prior Plan is credited
and from which distributions to the Participant or to his or her Beneficiary are
debited. A Participant shall at all times be fully vested in the balance of his
or her Transfer Deferred Compensation Subaccount.

        1.51. "Transfer Deferred Stock Subaccount" means the bookkeeping account
               ---------------------------------- 
established by the Administrator for each Participant to which the Participant's
Shares deferred pursuant to a Prior Plan are credited and from which
distributions to the Participant or to his or her Beneficiary are debited. A
Participant shall at all times be fully vested in the balance of his or her
Transfer Deferred Stock Subaccount, except to the extent Shares have not yet
vested pursuant to the terms of the Prior Plan.





                                     -11-
<PAGE>
 
        1.52. "Transfer Employer Matching Subaccount" means the bookkeeping
               ------------------------------------- 
account established by the Administrator for each Participant to which the
Participant's matching contributions pursuant to a Prior Plan are credited and
from which distributions to the Participant or to his or her Beneficiary are
debited. A Participant shall at all times be fully vested in the balance of his
Transfer Employer Matching Subaccount.

                                   ARTICLE 3
                     PARTICIPATION BY ELIGIBLE INDIVIDUALS
                     -------------------------------------

        1.53. Participation. Participation in the Plan is limited to Eligible
              -------------  
Individuals. An Eligible Individual shall participate in the Plan as determined
by the Committee in its sole discretion; provided, however, that for purposes of
individuals who first become Eligible Individuals during a Plan Year, such
Eligible Individuals shall participate in the Plan as determined by the
Administrator in his or her sole discretion.

        1.54. Failure to Designate. If the Committee fails to designate the
              --------------------  
group of Eligible Individuals who shall be eligible to participate for any Plan
Year, each Eligible Individual who was designated in the prior Plan Year shall
be deemed to have been designated for the next succeeding Plan Year, provided
that any such person shall participate for purposes of the next succeeding Plan
Year only if he or she is actively employed by an Employer or serving as a non-
employee director of Conectiv on the first day of such succeeding Plan Year and
provided he or she is an Eligible Individual for such year.

        1.55. Continuity of Participation. A Participant who separates from
              ---------------------------  
service with all of the Employers or ceases to be a non-employee director of
Conectiv or a subsidiary or affiliate of Conectiv will cease active
participation hereunder. However, the separation from service of an Eligible
Individual with one Employer will not interrupt the continuity of his or her
active participation if, concurrently with or immediately after such separation,
he or she is employed by one or more of the other Employers.

        1.56. Immediate Cash-Out of Ineligible Individuals. The Plan is intended
              --------------------------------------------  
to be an unfunded "top-hat" plan, maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees. Accordingly, if the Committee determines that any
Participant who is an employee does not qualify as a member of the select group,
the vested portion of such Participant's Account shall be paid to the
Participant immediately, and the unvested portion shall be returned to the
applicable Incentive Plan.

                                   ARTICLE 4
                             COMPENSATION DEFERRAL
                             ---------------------

        1.57. Deferral Elections.
              ------------------                  

              1.57.1. General. No later than the "Deferral Deadline" as shown in
Table 4.1, each Eligible Individual designated as eligible to participate for
purposes of this Article 4 may 




                                     -12-
<PAGE>
 
irrevocably elect, by completing and executing an Election and filing it with
the Administrator, to defer any portion of his or her Compensation to be paid in
the future.

                                 TABLE 4.1
                                 ---------
<TABLE>
<CAPTION>
===============================================================================================
Type of Deferral                                       Deferral Deadline
----------------                                       -----------------          
-----------------------------------------------------------------------------------------------
<S>                           <C>    
      Base Salary                December 31 of the Plan Year preceding the Plan Year for
                                 which the deferral is to be effective.
-----------------------------------------------------------------------------------------------
 
          Bonus                  June 30 of the performance year for which the award is
                                 earned, provided that with respect to bonus awards declared
                                 under the CICP for 1998 and which are subject to the MSPP
                                 provisions of the Plan and which may become payable in 1999,
                                 December 31, 1998.
-----------------------------------------------------------------------------------------------
 
          Cash Awards            December 31 of the Plan Year preceding the Plan Year in which
                                 such Cash Award vests, becomes payable, or is exercised (as
                                 applicable); provided that such election is at least six (6)
                                 months prior to vesting, payout, or exercise.
-----------------------------------------------------------------------------------------------
 
          Stock Awards, and      December 31 of the Plan Year preceding the Plan Year in which
           Amounts Credited to   such Stock Award vests, becomes payable, or is exercised (as
           the DSPP, DSPP        applicable); provided that such election is at least six (6)
           Matching, MSPP and    months prior to vesting, payout, or exercise.
           MSPP Matching
           Accounts
-----------------------------------------------------------------------------------------------
 
          Dividend Equivalents   December 31 of the Plan Year preceding the Plan Year in which
           (with respect to      the dividend equivalents are payable.
           Stock Awards)         With respect to Stock Options, Dividend Unit Equivalents and
                                 Performance Accelerated Restricted Stock granted after
                                 December 31, elections must be made within 30 days from the
                                 effective date of grant.
-----------------------------------------------------------------------------------------------
 
Dividend Equivalents (with       Dividend equivalents are automatically credited to a
 respect to Deferred Stock and   Participant's Deferred Compensation Account once a deferral
 Deferred Option Stock)          election with respect to a Stock Award is made; provided,
                                 however, that once a Stock Award vests, dividend equivalents
                                 are credited to the Deferred Stock Account.
-----------------------------------------------------------------------------------------------
 
          Severance Payments     December 31 of the second Plan Year preceding the payment of
                                 any severance.
-----------------------------------------------------------------------------------------------
 
          Retainer and Meeting   Last day of Plan Year prior to Plan Year for which retainer
           Fees                  and meeting fees are paid.
===============================================================================================
</TABLE>



                                     -13-
<PAGE>
 
              1.57.2. Limit on Deferral of Base Salary. In the case of deferral
of base salary, a Participant may defer up to 100% of base pay, less any
applicable withholding.

              1.57.3. Elections in First Year of Plan. Elections pursuant to
Section 4.1 by individuals who are identified as Eligible Individuals on July 1,
1998 must be filed with the Administrator on or before the later of (1) the
close of business on July 31, 1998 or (2) the deferral deadline specified in
Table 4.1 and shall be effective for payroll periods and payments, as
applicable, on and after the date the Election is filed; provided, however, that
if a later effective date for Section 4.1 is specified by the Board or the
Committee, Elections pursuant to Section 4.1 must be filed in accordance with
Section 4.1.4.

              1.57.4. Elections for First Year as Eligible Individual.
Notwithstanding the foregoing provisions of Section 4.1, in the Plan Year an
individual first becomes an Eligible Individual, the Eligible Individual may
elect to defer all or a portion of his or her Compensation to be earned in such
Plan Year beginning with the later of the payroll period or payment date, as
applicable, next following the filing of an Election with the Administrator and
before the close of such Plan Year, by making and filing such Election with the
Administrator within 30 days of the date such individual becomes an Eligible
Individual; provided, however, that if the deferral deadline specified in Table
4.1 has not passed with respect to an element of Compensation, then the deferral
deadline in Table 4.1 shall apply. Elections by such Eligible Individual for
succeeding Plan Years shall otherwise be made in accordance with the foregoing
provisions of Section 4.1.

        1.58. Period for Which Election is Effective. A Participant's Election
              --------------------------------------  
under Section 4.1 shall be effective only with respect to the Plan Year, or
portion thereof, specified in the Election, except that a deferral election that
provides for (a) regular deferrals of base salary as of each pay period, (b)
deferrals of Dividend Equivalents, and/or (c) meetings fees, shall be deemed to
continue for successive Plan Years unless and until amended by the Participant.
An amendment shall be effective only if it is filed by the December 31 of the
Plan Year preceding the Plan Year for which it is to be effective and shall be
effective as of the first day of such succeeding Plan Year. A Participant's
Election with respect to a Stock Award or a Cash Award shall be effective only
with respect to the portion of the Stock Award or a Cash Award specified
therein.

                                   ARTICLE 5
                           EMPLOYER MATCHING CREDITS
                           -------------------------

        1.59. Employer Matching Credit.
              ------------------------  

              1.59.1. The amount of the Employer Matching Credit credited to the
Employer Matching Account of each Eligible Individual designated as eligible to
participate in this Section 5.1 shall be equal to the "Employer Matching
Contributions" which would have been made to the Participant's "Thrift Fund
Account" under the Savings Plan but for statutory limitations. Generally, the
Employer Matching Credit shall be equal to the "matching percentage" (50%, as of
the effective date of this Plan) set forth in the Savings Plan, multiplied by
the first 6% of the Participant's base salary in excess of the Code
(S)401(a)(17) limit that is deferred under Section 4.1.





                                     -14-
<PAGE>
 
              1.59.2. In the event the dollar amount of the "Employer Matching
Contributions" under the Savings Plan for the Plan Year was limited due to the
application of the provisions of Section 401(m) of the Code, or the percentage
of the Participant's base salary that could be deferred under the Savings Plan
was limited to an amount less than 6% because of other Code limitations, an
additional Employer Matching Credit shall be contributed under the Plan equal to
the amount of "Employer Matching Contributions" that would have been made to the
Savings Plan but for such limitations, but only if and to the extent the
Participant has deferred additional amounts of base salary to the Plan at least
equal to the amount that would have been required to have been deferred under
the Savings Plan in order to support such additional "Employer Matching
Contributions" in the absence of such limitations.

              1.60. Employer Matching Credit for Limited Participant. For any
                    ------------------------------------------------    
Participant whose right to receive "Employer Matching Contributions" under the
Savings Plan is limited by a specific Savings Plan provision to $10 or less
(without regard to the amount of salary deferrals elected by such Participant),
the Employer Matching Credit shall be equal to the matching percentage described
in Section 5.1, multiplied by the first 6% of the Participant's base salary that
is deferred under Section 4.1.

                                   ARTICLE 6
                                 DISTRIBUTIONS
                                 -------------
 
        1.61. Election of Distribution Date. At the time a Participant makes an
              -----------------------------  
election to defer Compensation under Article 4, such Participant shall also
specify in writing on the Election the date on which payment of the Account
attributable to that Election shall be made or commence. Such date must be a
specified date not less than two years from the end of the Plan Year of the
deferral and not later than the year in which the Participant will attain age
70; provided, however, that severance payments may be deferred for a shorter
period than two years from the end of the Plan Year of deferral.

        Except as set forth hereinafter, the above distribution date, once
elected by the Participant, shall be irrevocable.

        1.62. Election of Form of Payment.
              ---------------------------                          

              1.62.1. Initial Election of Payment Form. At the time a
                      --------------------------------  
Participant makes an election to defer Compensation under Section 4.1, such
Participant must also specify in writing on the Election the form in which
payment of the Deferred Compensation Account attributable to that Election shall
be made.

              1.62.2. Changes in Election. If a payment form is not specified in
                      -------------------  
the Election, or if a payment form is specified but a Participant wishes to
change the payment form, a change with respect to payment form may be effective
only if submitted to the Administrator no later than the last day of the
calendar year that ends at least one year before the distribution date, and
subject to approval by the Committee.





                                     -15-
<PAGE>
 
              1.62.3. Forms of Payment.
                      ----------------                          

                      (1) General. A payment method shall be in the form of a
                          -------      
lump sum payment or in equal annual installments over five, ten, or fifteen
years.

                      (2) Default Form. In the absence of a valid election,
                          ------------      
distribution shall be in the form of annual installments over a 10-year period.
Except as set forth herein, the form of payment, once elected by the
Participant, shall be irrevocable.

                      (3) Distributions in Shares. Distribution of a
                          -----------------------       
Participant's Deferred Stock Account and/or Company Matching Account, including
the amount of any dividend equivalents credited to such Accounts pursuant to an
Election, shall, at the election of Conectiv, be in the form of cash or Shares,
which may be purchased by Conectiv or transferred from any grantor trust or
other treasury stock account maintained by Conectiv, and shall be distributed as
soon as administratively practicable. A Participant may elect to direct that a
portion of the Deferred Stock Account and/or Company Matching Account shall be
paid in cash for the purpose of satisfying applicable tax withholding
requirements.

        1.63. Unforeseeable Emergency.
              -----------------------  

              1.63.1. General. The Committee shall have the authority to
                      -------  
determine, in its sole discretion, that payments should be made in any manner
the Committee deems appropriate, in whole or in part, on any other date or dates
in order to alleviate a financial hardship of a Participant or a Beneficiary.

              1.63.2. Financial Hardship. "Financial hardship" shall mean a
                      ------------------  
severe financial hardship resulting from a sudden and unexpected illness or
accident of the Participant or Beneficiary, or of a dependent (as defined in
Section 152(a) of the Code) of the Participant or Beneficiary, loss of the
Participant's or Beneficiary's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant or Beneficiary. The circumstances that
will constitute an unforeseeable emergency will depend on the facts of each
case, but, in any case, payment may not be made to the extent that such hardship
is or may be relieved: (i) through reimbursement or compensation by insurance or
otherwise; (ii) by liquidation of the Participant's or Beneficiary's assets, to
the extent such liquidation would not itself cause severe financial hardship;
and (iii) by cessation of deferrals under the Plan. Any financial hardship
distribution approved by the Committee shall be limited to the amount necessary
to meet the emergency (including taxes that are expected to be imposed on the
distribution), and shall be made solely from the vested portion of the Deferred
Compensation Account and Deferred Stock Account.

        1.64. Special Election for Early Distribution. A Participant may apply
              ---------------------------------------  
to the Administrator for early distribution of all or any part of the vested
portion of his or her Deferred Compensation Account and/or Deferred Stock
Account. Such early distribution shall be made in a single lump sum and in
Shares with respect to Deferred Stock and Deferred Option Stock, 



                                     -16-
<PAGE>
 
provided that 10% of the amount withdrawn in such early distribution shall be
forfeited prior to payment of the remainder to the Participant. A Participant
may not elect an early distribution hereunder if he has received an early
distribution or hardship distribution within the previous twelve months. In the
event a Participant's early distribution election is submitted within 60 days
after a Change in Control or an elimination of Investment Alternatives that the
Committee determines is a substantial detriment to Participants, the early
distribution election may include amounts credited to the Employer Matching
Account, and the forfeiture penalty shall be reduced to 5%.

        1.65. Distributions on Death. In the event of a Participant's death
              ----------------------  
before his or her Account has been fully distributed, distribution(s) shall be
made to the Beneficiary selected by the Participant. The form of distribution
shall be in the form of a single lump sum with respect to Deferred Compensation,
and, with respect to Deferred Stock and Deferred Option Stock, at the election
of Conectiv, shall be in the form of Shares or cash, within 60 days after the
Administrator receives notice of the date of death (or, if later, after the
proper Beneficiary has been identified). A Participant may from time to time
change his or her designated Beneficiary without the consent of such Beneficiary
by filing a new designation in writing with the Administrator. If no Beneficiary
designation is in effect at the time of the Participant's death, or if the
designated Beneficiary is missing or has predeceased the Participant, payment
shall be made to the Participant's surviving spouse, or if none, to his or her
surviving children per stirpes, or, if none, to his or her estate.

        1.66. Acceleration of Payments. Notwithstanding any other provision of
              ------------------------  
the Plan to the contrary, the Committee, in its sole discretion, is empowered to
accelerate the payment of all or a portion of a Participant's Account, before or
after any termination of employment or service, including conversion to a
smaller number of installment payments or to a single lump sum payment, for any
reason the Committee may determine to be appropriate without premium or penalty.
None of the Employers, the Committee nor the Board shall have any obligation to
make any such acceleration for any reason whatsoever.

        1.67. Valuation of Distributions. All distributions under the Plan shall
              --------------------------  
be: (a) based upon the value of the Participant's Deferred Compensation Account
as of the Investment Alternative valuation date immediately preceding the date
of the distribution; or (b) paid in the form of Shares or, where otherwise
permitted under the Plan, such Shares may be converted to cash at the fair
market price of such Shares as of the immediately preceding trading day. It is
understood that administrative requirements may lead to a delay between such
valuation date or trading day and the date of distribution.

                                   ARTICLE 7
                             FORFEITURE FOR CAUSE
                             --------------------

        1.68. Forfeiture for Cause. If any Participant entitled to an Employer
              --------------------   
Matching Credit under the Plan is discharged for cause, or enters into
competition with an Employer, or interferes with the relations between an
Employer and any customer, or engages in any activity that would result in
material damage to an Employer as determined in the sole discretion of the



                                     -17-
<PAGE>
 
Committee, the rights of such Participant to an Employer Matching Credit under
the Plan, including the rights of a Beneficiary to such benefits, will be
forfeited, unless the Committee determines that such activity is not detrimental
to the best interests of the Employer. However, if the individual ceases such
activity and notifies the Committee of this cessation, then the Participant's
right to receive such benefits, and any right of a Beneficiary to such benefits,
may be restored if the Committee in its sole discretion determines that the
prior activity has not caused serious injury to the Employer and that the
restoration of the benefits would be in the best interest of the Employer. All
determinations by the Committee with respect to forfeiture or restoration of
such benefits shall be final and conclusive.

                                   ARTICLE 8
                                   ACCOUNTS
                                   --------

        1.69. General. The Administrator shall establish and maintain, or cause
              -------  
to be established and maintained, separate Accounts for each Participant
hereunder who executes an election pursuant to Section 4.1. Each such
Participant's Compensation deferred pursuant to an Election shall be separately
accounted for and credited, for bookkeeping purposes only, to his or her
Accounts. A Participant's Account shall be solely for the purposes of measuring
certain amounts to be paid under the Plan, and Conectiv shall not be required to
fund or secure such Account in any way, Conectiv's obligation to Participants
hereunder being purely contractual.

        1.70. Deferred Compensation Account.
              -----------------------------  

              1.70.1. The Deferred Compensation Account shall be credited with
cash Compensation deferred pursuant to an Election under Section 4.1.

              1.70.2. The Transfer Deferred Compensation Subaccount shall be
governed by the Elections in effect with respect to amounts credited to such
subaccount, and, thereafter, shall be governed by the rules in effect under the
Plan.

        1.71. Deferred Stock Account.
              ----------------------  

              1.71.1. The Deferred Stock Account shall be credited with Deferred
Stock and Deferred Option Stock. If, at the conclusion of the applicable
performance cycle pursuant to an Incentive Plan, specified performance goals
have not been met, the Deferred Stock Account shall reflect the forfeiture of
such Deferred Stock.

              1.71.2. The Deferred Stock Account shall also be credited with the
number of Shares that could be purchased, as of the dividend payment date, by
the amount of any dividend equivalents deferred pursuant to Section 4.1.

              1.71.3. The Transfer Deferred Stock Subaccount shall be governed
by the Elections in effect with respect to amounts credited to such subaccount,
and, thereafter, shall be governed by the rules in effect under the Plan.




                                     -18-
<PAGE>
 
        1.72. Employer Matching Account.
              -------------------------  

              1.72.1. Employer Matching Credits are credited to the Employer
Matching Account.

              1.72.2. The Employer Matching Account shall also be credited with
the number of Shares that could be purchased, as of the dividend payment date,
by the amount of any dividend equivalents deferred pursuant to Section 4.1.

              1.72.3. The Transfer Employer Matching Subaccount shall be
governed by the rules in effect under the Plan.

        1.73. Crediting of Earnings and Losses, and Statement of Account. At
              ----------------------------------------------------------  
such times, with such frequency, and in such percentages as the Administrator
shall determine, each Participant may elect the Investment Alternatives in which
his or her Deferred Compensation Account may be deemed invested (subject to the
approval of the Committee). The Participant's Employer Matching Account and
Deferred Stock Account shall be deemed invested solely in Shares, shall be
denominated in numbers of Shares, and shall be valued at any time as the Shares
credited to such Account multiplied by the then-current market value of the
Shares. Amounts credited to the Deferred Compensation Account will be increased
by earnings (or decreased by losses) equal to the earnings or losses that would
be realized by such Account if it had been invested in the Investment
Alternatives specified by the Participant. As soon as practicable after the end
of each Plan Year (and at such additional times as the Administrator may
determine), the Administrator shall furnish each Participant with a statement of
the balance credited to the Participant's Account.

        1.74. Investment to Facilitate Payment of Benefits. Although the
              --------------------------------------------          
Employers are not obligated to invest in any specific asset or fund, or purchase
any insurance contract in order to provide the means for the payment of any
liabilities under the Plan, an Employer may elect to do so. In the event an
Employer elects to invest in any specific asset or fund, the Committee may, but
is not required to, honor the investment request of the Participant described in
Section 8.4, with respect to any investment to facilitate payment.

        In the event an Employer elects to purchase an insurance contract or
contracts on the life of a Participant as a means for the payment of any
liabilities under the Plan, the Participant shall cooperate in the securing of
such insurance contract or contracts by furnishing all information and taking
all actions as the Employer and the insurance carrier may require, including
without limitation providing the results and reports of previous Employer and
insurance carrier physical examinations and taking such additional physical
examinations as may be requested. The Employer shall be the sole owner of any
such insurance contract or contracts or fund or asset, with all incidents of
ownership therein, including without limitation the right to cash and loan
values, dividends, death benefits and the right to terminate any such contract
or contracts or to dispose of any such fund or asset.




                                     -19-
<PAGE>
 
        The Participant shall have no interest whatsoever in any contract or
contracts or fund or asset and shall exercise none of the incidents of ownership
thereof.

                                   ARTICLE 9
                                    FUNDING
                                    -------

        1.75. Plan Unfunded. The Plan shall be unfunded and no trust shall be
              -------------  
created by the Plan. The crediting to each Participant's Account shall be made
through bookkeeping entries. No actual funds shall be set aside; provided,
however, that nothing herein shall prevent the Employer from establishing one or
more grantor trusts from which benefits due under the Plan may be paid in
certain instances. All distributions shall be paid by the Employer from its
general assets and a Participant (or his or her Beneficiary) shall have the
rights of a general, unsecured creditor against the Employer for any
distributions due hereunder. The Plan constitutes a mere promise by the Employer
to make benefit payments in the future.

                                  ARTICLE 10
                       ADMINISTRATION AND INTERPRETATION
                       ---------------------------------

        1.76. Administration. Except where certain duties are delegated to the
              --------------  
Administrator, the Committee shall be in charge of the operation and
administration of the Plan. The Committee has, to the extent appropriate and in
addition to the powers described elsewhere in the Plan, full discretionary
authority to construe and interpret the terms and provisions of the Plan; to
adopt, alter and repeal administrative rules, guidelines and practices governing
the Plan; to perform all acts, including the delegation of its administrative
responsibilities to advisors or other persons who may or may not be employees of
the Employers; and to rely upon the information or opinions of legal counsel or
experts selected to render advice with respect to the Plan, as it shall deem
advisable, with respect to the administration of the Plan.

        1.77. Interpretation. The Committee may take any action, correct any
              --------------  
defect, supply any omission or reconcile any inconsistency in the Plan, or in
any election hereunder, in the manner and to the extent it shall deem necessary
to carry the Plan into effect or to carry out the Committee's purposes in
adopting the Plan. Conectiv reserves the right to interpret the Plan and any
decision, interpretation or other action made or taken in good faith by the
Board, the Committee, or the Administrator arising out of or in connection with
the Plan, shall be within the absolute discretion of all and each of them, as
the case may be, and shall be final, binding and conclusive on the Employers,
employees, non-employee directors of Conectiv, Participants and Beneficiaries
and their respective heirs, executors, administrators, successors and assigns.
The Committee's determinations hereunder need not be uniform, and may be made
selectively among Eligible Individuals, whether or not they are similarly
situated. Any actions to be taken by the Committee will require the consent of a
majority of the Committee members. If a member of the Committee is a Participant
in the Plan, such member may not decide or determine any matter or question
concerning his or her benefits under the Plan that such member would not have
the right to decide or determine if he or she were not a member.



                                     -20-
<PAGE>
 
        1.78. Records and Reports. The Administrator shall keep a record of
              -------------------  
proceedings and actions and shall maintain or cause to be maintained all such
books of account, records, and other data as shall be necessary for the proper
administration of the Plan. Such records shall contain all relevant data
pertaining to individual Participants and their rights under the Plan. The
Administrator shall have the duty to carry into effect all rights or benefits
provided hereunder to the extent assets of the Employers are properly available
therefor.

        1.79. Payment of Expenses. The Employers, in such proportions as the
              -------------------  
Committee determines, shall bear all expenses incurred by them and by the
Committee in administering the Plan. If a claim or dispute arises concerning the
rights of a Participant or Beneficiary to amounts deferred under the Plan
(including interest or earnings thereon), regardless of the party by whom such
claim or dispute is initiated, the Employers shall (in such proportions as
between the Employers as the Committee determines), and upon presentation of
appropriate vouchers, pay all legal expenses, including reasonable attorneys'
fees, court costs, and ordinary and necessary out-of-pocket costs of attorneys,
billed to and payable by the Participant or by anyone claiming under or through
the Participant (such person being hereinafter referred to as the "Participant's
Claimant"), in connection with the bringing, prosecuting, defending, litigating,
negotiating, or settling of such claim or dispute; provided, that:

              1.79.1. The Participant or the Participant's Claimant shall repay
to the Employers any such expenses theretofore paid or advanced by the Employers
if and to the extent that the party disputing the Participant's rights obtains a
judgment in its favor from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has expired or otherwise,
and it is determined by the court that such expenses were not incurred by the
Participant or the Participant's Claimant while acting in good faith; provided
further, that

              1.79.2. In the case of any claim or dispute initiated by a
Participant or the Participant's Claimant, such claim shall be made, or notice
of such dispute given, with specific reference to the provisions of the Plan, to
the Committee within one year (two years, in the event of a Change in Control)
after the occurrence of the event giving rise to such claim or dispute.

        1.80. Indemnification for Liability. The Employers shall indemnify the
              -----------------------------  
Administrator, the members of the Committee, and the employees of any Employer
to whom the Administrator delegates duties under the Plan, against any and all
claims, losses, damages, expenses and liabilities arising from their
responsibilities in connection with the Plan, unless the same is determined to
be due to gross negligence or willful misconduct.

        1.81. Claims Procedure. If a claim for benefits or for participation
              ----------------  
under the Plan is denied in whole or in part, an employee or non-employee
director will receive written notification. The notification will include
specific reasons for the denial, specific reference to pertinent provisions of
the Plan, a description of any additional material or information necessary to
process the claim and why such material or information is necessary, and an
explanation of the claims review procedure. If the Committee fails to respond
within 90 days, the claim is treated as denied.




                                     -21-
<PAGE>
 
        1.82. Review Procedure. Within 60 days after the claim is denied or, if
              ----------------  
the claim is deemed denied, within 150 days after the claim is filed, an
employee or non-employee director (or his or her duly authorized representative)
may file a written request with the Committee for a review of his or her denied
claim. The employee may review pertinent documents that were used in processing
his or her claim, submit pertinent documents, and address issues and comments in
writing to the Committee. The Committee will notify the employee of its final
decision in writing. In its response, the Committee will explain the reason for
the decision, with specific references to pertinent Plan provisions on which the
decision was based. If the Committee fails to respond to the request for review
within 60 days, the review is treated as denied.

                                  ARTICLE 11
                           AMENDMENT AND TERMINATION
                           -------------------------

        1.83. Amendment and Termination. The Board shall have the right, at any
              -------------------------  
time, to amend or terminate the Plan in whole or in part provided that such
amendment or termination shall not adversely affect the right of any Participant
or Beneficiary to a payment under the Plan on the basis of deferred compensation
allocated to the Participant's Deferred Compensation Account or Deferred Stock
Account or on the basis of an Employer Matching Credit credited to the Employer
Matching Account prior to such amendment or termination. Conectiv reserves the
right, in its sole discretion, to discontinue deferrals under, or completely
terminate, the Plan at any time. If the Plan is discontinued with respect to
future deferrals, Participants' Account balances shall be distributed on the
distribution dates elected in accordance with Sections 6.1 and 6.2, unless the
Committee designates that distributions shall be made on an earlier date or
dates. If the Committee designates such earlier date or dates, each Participant
shall receive (or commence receiving) distribution of his or her entire Account
balance on such date or dates, as specified by the Committee. If the Plan is
completely terminated, each Participant shall receive distribution of his or her
entire Account balance in one lump sum payment as of the date of the Plan
termination designated by the Board.

        1.84. Deemed Amendment to Matching Formula. In the event the matching
              ------------------------------------  
contribution formula under the Savings Plan is modified to increase or reduce
the matching percentage or the percentage of base salary that is matched, the
formulae in Section 5.1 and Section 5.2 shall be deemed to be modified to equal
such matching percentage or percentage of base salary that is matched, unless
otherwise specified in the Board vote amending the Savings Plan.

                                  ARTICLE 12
                           MISCELLANEOUS PROVISIONS
                           ------------------------

        1.85. Right of Employers to Take Employment Actions. The adoption and
              ---------------------------------------------  
maintenance of the Plan shall not be deemed to constitute a contract between an
Employer and any employee or non-employee directors, or to be a consideration
for, or an inducement or condition of, the employment or engagement of any
person. Nothing herein contained, or any action taken hereunder, shall be deemed
to give any employee or non-employee director the right to be retained in the
employ or service of an Employer or to interfere with the right of an 



                                     -22-
<PAGE>
 
Employer to discharge any employee or non-employee director at any time or to
change any employee's or non-employee director's compensation or benefits, nor
shall it be deemed to give to an Employer the right to require the employee or
non-employee director to remain in its service, nor shall it interfere with the
employee's right to terminate his or her employment at any time or a non-
employee director's right to resign from service at any time. Nothing in the
Plan shall prevent an Employer from amending, modifying, or terminating any
other benefit plan, including the Savings Plan and the Incentive Plan(s).

        1.86. Alienation or Assignment of Benefits. A Participant's rights and
              ------------------------------------  
interest under the Plan shall not be assigned or transferred except as otherwise
provided herein, and the Participant's rights to benefit payments under the Plan
shall not be subject to alienation, pledge or garnishment by or on behalf of
creditors (including heirs, beneficiaries, or dependents) of the Participant or
of a Beneficiary, except for a qualified domestic relations order as defined in
Section 514(b)(7) of the Employee Retirement Income Security Act of 1974, as
amended.

        1.87. Right to Withhold. To the extent required by law in effect at the
              -----------------  
time a distribution is made from the Plan, the Employer or its agents shall have
the right to withhold or deduct from any distributions or payments any taxes
required to be withheld by federal, state or local governments.

        1.88. Construction. All legal questions pertaining to the Plan shall be
              ------------  
determined in accordance with the laws of the State of Delaware (without regard
to otherwise-applicable conflict of law principles), to the extent such laws are
not superseded by the Employee Retirement Income Security Act of 1974, as
amended, or any other federal law.

        1.89. Headings. The headings of the Articles and Sections of the Plan
              --------  
are for reference only. In the event of a conflict between a heading and the
contents of an Article or Section, the contents of the Article or Section shall
control.

        1.90. Number and Gender. Whenever any words used herein are in the
              -----------------  
singular form, they shall be construed as though they were also used in the
plural form in all cases where they would so apply, and references to the male
gender shall be construed as applicable to the female gender where applicable,
and vice versa.

        1.91. Change in Control. At the Committee's discretion, after
              -----------------  
consultation with all affected Participants, in the event of a Change in Control
and a termination of employment or service for any reason, each affected
Participant's Account shall either be distributed immediately to the Participant
in one lump sum payment, or paid in accordance with the distribution options
selected by the Participant, as determined by the Committee and made applicable
to all affected Participants. In the event distribution continues to be deferred
under the terms of the Plan, the affected Employer shall be required to
contribute cash or equivalent assets to a grantor trust (maintained by an
institutional trustee independent of the Employer) within 60 days after such
Change in Control, in an amount not less than the then-current value of all
Participant Accounts related to such Employer.





                                     -23-